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Grupo Éxito delivers 2.5% sales growth in Colombia in Q1

Date : 23 May 2019

In the first quarter Grupo Éxito reported net sales of COP2.64tn (US$788.9m) in Colombia, a growth of 2.5%. Same-store sales (SSS) grew by 2%, which was mainly due to strong like-for-like performance of stores under its Éxito banner, as well as higher volume and traffic.

At a group level Grupo Éxito reported a consolidated net revenue of COP14.3tn (US$4.19bn) in Q1, which represents a 3.9% increase on Q1 2018. This was predominantly driven by strong net sales performance in Colombia (+2.7%) and Brazil (+12%).

This article will focus on Grupo Éxito’s Q1 performance in Colombia. We have written a separate article on the business’s Q1 performance in Brazil, under the GPA banner, which can be found here.

A mixed performance across banners…

Éxito stores are the business’s highest performing banner in Colombia, representing c. 70% of total sales. In Q1 Éxito stores delivered a 4% sales increase and a 3.4% growth in SSS.

Éxito store, Bogotá
Source: IGD Research

Stores under the Carulla banner saw a slight 1.2% sales increase (0.6% SSS). However, the business’s low-cost banners Super Inter and Surtimax, which represent c. 11% of combined sales, saw a 11% decrease in net sales in the quarter.

Cash and carry delivering encouraging results…

In the last 12 months the business has opened 20 stores in Colombia, of which 12 openings were Surtimayorista. The business aims to open a further 10 stores in 2019, taking total stores under this banner to 30.

Remodelling underperforming banners to cash and carry…

Grupo Éxito has been converting underperforming Surtimax stores into the Surtimayorista banner. In Q1 the business opened four stores in Colombia, of which two were Surtimayorista/Surtimax conversions (as well as two new Éxito stores). A further seven cash and carry conversions are currently in progress.

Surtimax, Bogotá
Source: IGD Research

Grupo Éxito could take learnings from GPA in Brazil…

Casino Group could share best practice from its cash and carry operations in Brazil, where the channel has quickly become its fastest growing. In Brazil, Casino, under the GPA banner, has remodelled many of its underperforming Extra Hiper hypermarkets to its Assaí cash and carry format and sales at these stores have more than doubled as a result.

Assaí store, São Paulo, Brazil
Source: IGD Research

Surtimayorista, Bogotá
Source: IGD Research

The stores which have been converted from Surtimax to Surtimayorista are already seeing improved sales partly due to lower operating costs. Grupo Éxito currently has 101 stores under the Surtimax banner. It’s unclear how many of these are underperforming but if Surtimayorista continues to grow, these units could provide the foundations to further expand its cash and carry presence in Colombia.

Further expansion of Wow and Fresh Market…

In 2019 Grupo Éxito plans to invest approximately COP270.0bn (US$80.6m) in to store optimisation and innovation in Colombia. It plans to open c. 20 stores as a mix of new stores, conversions and remodels.

Grupo Éxito’s Wow and Fresh Market banners were both launched in 2018. The two stores that were converted to Éxito Wow in 2018, and the six converted to Fresh Market both delivered double-digit sales increases. The business said it will open “at least” five stores under each of these banners in 2019.

Carulla Fresh Market, Bogota
Source: IGD Research

Grupo Éxito forecasts that over 20% of its 2019 sales will come from innovative developments across its Wow, Fresh Market, Cash & Carry and omnichannel operations.

Encouraging omnichannel growth in first quarter…

In Q1 the business grew its omnichannel sales by 38%, reaching COP104.0bn (US$31.0m). For now, omnichannel sales are a small part of the business overall, representing just 3.9% of sales. We expect this to continue to grow but, based on what we have seen in other markets, we believe this will be at a slow pace.

Grupo Éxito is the ecommerce market leader in Colombia. Sales through exito.com and carulla.com increased by 24% in Q1 and orders grew by 18.4%. The business relaunched its Éxito and Carulla apps taking learnings from GPA’s apps in Brazil. In the first quarter downloads across both apps reached almost 460,000.

Successfully bridging the gap between online and bricks and mortar stores…

Click and collect is now available in 254 stores, which is preferred by shoppers wanting non-food items delivered. Digital catalogue/ordering points have been installed in 173 stores and orders made through these have increased by c. 40%. Gross Merchandise Volume (GMV) through its marketplace has grown by almost 50% and the business now works with c. 1,300 vendors, offering customers more product choice online.

For time-poor customers Grupo Éxito can now fulfil home deliveries within 35 minutes through its partnership with last mile delivery app Rappi.

Rappi now available in 57 cities across 7 Latin American countries
Source: Rappi

Grupo Éxito’s mid-term strategy

The retailers said that in the short to mid-term it will put further investment in to its innovative new store concepts, expanding its cash and carry banner and further enhancing omnichannel operations.

The business’s various omnichannel initiatives are successfully creating more of a seamless shopping experience between online and physical stores. As we have seen in other markets, this is a fundamental step in meeting changing consumer demands and enhancing the in-store experience.

Moreno states that “the omnichannel model also contributed to results, positioning the Company as the strongest platform in South America. Grupo Éxito is leading a strategy adapted to changes in consumer trends in a retail market expanding within the digital world".

We look at five themes, including the growth of discounters and the continued strength of the atacajero format, that are set to shape the region's grocery markets in 2019 and beyond. With case studies from Brazil, Colombia and Mexico, amongst others, and retailers like Carrefour, GPA and Walmart, the presentation highlights the challenges and opportunities the region is expected to provide manufacturers in the short term.

In this round-up we share our key highlights and trends that impressed us over the last few months in the course of our store visits. Within this report we present examples from retailers in a number of markets including Sainsbury's, Aldi, Lidl, Kroger and many more.